How our Algorithm Traded $GS this Morning
Tuesday, April 20, 2010 at 1:30PMWritten by Michael Bigger. Follow me on Twitter.
Yesterday, we said in this post that It might be of interest to short the large dealers if they rally.
So we set up our algorithm to lean short on Goldman Sachs (GS) and establish our short as a fade a quick move up type of trade. We were fortunate to get a strong upward move in $GS after it announced earnings. Our algorithm sold the stock short at $164.45 and covered this position a few dollars lower. We were very doubtful that shorting GS was a great thing to do. The beauty of algorithmic trading is that it takes the emotion out of the equation. If the mental model makes sense, follow it. We are just learning about how to trade in a Levy Flight news cluster. This is an experiment, and we could be completely off the mark. Our intuition tells us that until the truffle diggers are done digging, the move and fade strategy is the way to go. Our algorithm will trade GS from a long bias when the news frequency on the company decreases.
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Reader Comments (2)
Nice trade. I screwed up on APPL , my friend keeps telling me that the best algorithm that works 80% of the time is to do opposite of what I suggest :).
Well, I was thinking about shorting Apple and I regain my senses. Thank god!